Lords of Finance: The Bankers Who Broke the World

by Liaquat Ahamed

It was the combination of the drying up of foreign credit due to high interest rates induced by the U.S. stock bubble and the residual lack of confidence among German businessmen following Schacht’s ill-fated strike against the stock market in 1927 that drove Germany into recession in early 1929. Moreover, as long-term American loans stopped, Germany was forced to rely more and more on hot money, some raised from London, but much from by French banks, then flush with all the excess gold that had been sucked into their country. Germany therefore found itself slipping into recession just as its foreign position was becoming increasingly vulnerable. A British Treasury official, recalling how much money France had pumped into Russia before the war, could not help remarking with cynical detachment, “The French have always had a sure instinct for investing in bankrupt countries.”